Spitzer: The Banking System is Broken

The system is broken, the banking system that is, says former New York Gov. and State Attorney General Eliot Spitzer.

On the cusp of bonus season on Wall Street, Spitzer blasted U.S. banks for their imminent multimillion dollar executive compensation packages, telling CBS' "The Early Show" Monday their profits were built solely on taxpayer-funded bailouts. "They (banks) believe they are entitled to these crazy sums of money," Spitzer said. "It is inequitable, it is wrong."

White House Economic Adviser Christina Romer fired the administration's latest shot toward Wall Street, saying Sunday that the bonuses were "ridiculous," adding that it will "offend the American people."

Asked what needs to change, Spitzer, who was once known as the "sheriff of Wall Street" before a sex scandal with a prostitute while New York governor destroyed his political career, was blunt: "We need a different banking system."

He said Treasury Secretary Timothy Geithner, with whom he regularly clashed when Geithner was the head of the New York Fed, "embraces the old vision of what banking should be."

"Right now we don't have a template for reform that is adequate," Spitzer said. "We need something fundamentally different."

Click below to see Spitzer's full interview with "The Early Show's" Harry Smith:

This week, the financial crisis inquiry commission begins hearings with the nation's top bank executives expected to attend. The commission was created by congress to investigate the near-collapse of the financial system," Glor reports.

Of the major investment banks to receive bailout money, Goldman Sachs is likely to get the lion's share of scrutiny thanks to its soaring profits and list of alumni holding key government positions. One analyst tells the Journal he expects Goldman Sachs to dole out $18 billion in bonuses, a 64 percent increase from 2008.

Goldman Sachs is trying to buffer itself from criticism by considering telling its top-earners they have to donate a certain percentage of its earnings to charity, The New York Times reports. However, the Times reports Goldman employees could make an average of almost $600,000.

Goldman Sachs declined to talk to both the Times and the Journal for their stories.